Mere Non-disclosure of Receipts in Service Tax Return does not mean Intent to Evade Payment of Service Tax: CESTAT [Read Order]

The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that mere non-disclosure of receipts in service tax return does not mean intent to evade payment of service tax.

The appellant, M/s Rangoli Division, is engaged inter alia in providing construction services in respect of commercial or industrial buildings, and construction of residential complex which are taxable under section 65(105)(zzq) and section 65(105)(zzzh) of the Finance Act, 1994.

It is in this context that the Government issued a Notification No. 36/2010-ST dated 28.6.2010, providing exemption from payment of service tax on the advances received before 01.07.2010 towards the services taxable under section 65(105)(zzq) and section 65(105)(zzzh) of the Finance Act, i.e., commercial or industrial construction services, and construction of complex services.

A show cause notice was issued to the appellant proposing to deny the benefit of the exemption Notification and a demand was made to recover service tax amounting to Rs. 6,79,025/- with interest for the period from July 2010 to September 2010 and penalty under sections 76 and 78 of the Finance Act. The show cause notice also invoked the extended period of limitation provided under the proviso to section 73(1) of the Finance Act on the ground of suppression of facts by appellant.

The counsel for the appellant submitted that the appellant had been filing the ST-3 returns with adequate disclosures and nothing was suppressed from the department. Since the amount that was received before 30.6.2010 as advances was not taxable under the Notification, the same was not disclosed in the returns. Once there is no requirement under law to disclose such receipts, it cannot be considered as suppression of facts. Even otherwise, the department was well aware of the relevant facts and figures as the audit was conducted, but the show cause notice was issued with inordinate delay.

The authorised representative who appeared for the department, however, supported the impugned order and submitted that it does not call for any interference in this appeal. It was submitted that the appellant was clearly not eligible to the benefit of the Notification as all the cheques were deposited in the bank after the cut of date i.e, 01.07.2010 and the cheques were realized/credited to the government account after 01.07.2010. Thus, the service tax was liable to be levied on the appellant.

A Two-Member Bench comprising Justice Dilip Gupta, President and PV Subba Rao, Technical Member observed that “Mere suppression of facts is not enough and there must be a deliberate and wilful attempt on the part of the assessee to evade payment of duty. In the absence of any intention to evade payment of service tax, which intention should be evident from the materials on record or from the conduct of the assessee, the extended period of limitation cannot be invoked. Thus, mere non-disclosure of the receipts in the service tax return would not mean that there was an intent to evade payment of service tax.”

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